hearing. that's the number that i think the stock is going to trade off of. >> big call buying in there as well. so people playing along with what you're talking about. >> we got 23 seconds here before we end the show. we got the markets closing in three hours. second half trades, josh? >> i would just say reiterate the market is guilty until proven innocent right now. you see these failed rallies continue. you see an up open like today get sold within 30 seconds. it tells you that we're in distribution and i don't think there's a compelling reason to try to fight against that day after day. >> all right. no time for the other second half trades. that does it for us. "power lunch" -- >> you're on a roll, michelle. "halftime" is over. "power lunch" and the second half of the trading day start right now. >> michelle, folks, thanks very much. we'll pick it up from there. welcome to "power lunch." along with mandy drury, i'm tyler mathisen. of course, the countdown is on. what will happen if the fed raises interest rates this week? we'll tell you about the stocks that are most sensitive to a rate hike. >> and what about housing if

rates begin to rise? four reasons to be bullish still about the american housing market ahead. and get a load of this one. american airlines actually flew the wrong plane from los angeles to hawaii. it wasn't certified to fly that distance over water. how in the world does something like that happen? >> that is the question we're going to try to find answers to. but we do begin ty with the possibility of a rate hike this week, which would be the first fed increase in about a decade. dominic chu has been taking a closer look at the stocks that are the most sensitive to a rate hike. >> arguably by what i'm going to show you, investors and traders have already been positioning themselves for a possible rate hike from the fed. so you have heard it before, we'll say it again. utility stocks are often viewed as one of the big sentiment gauges or proxies for what happens with interest rates. the reason why is because when interest rates rise or are threatened to rise, utility stocks tend to sell off. what you can see here is over

this year-to-date period, just again in 2015, those stocks, utilityings ies st. in the s&p 30%. it spans the entire spectrum. just to give you an idea. it doesn't matter about geographic location or type of utilities. pg pg&e, they're down 9%. you look at a southern company, down 13%. ex elon down 19%. nrg lost a third of its value. some of the biggest decliners in the utility stocks. it's not just there. look at the real estate investment trust. this is another part of the market that's viewed as a proxy for income, dividends, interest rates. the vanguard reit etf, down 9%. a steady decline. as investors come to grip with the idea that possibly an

interest rate hike will happen, these real estate investment trusts, utilitieutilities, wille the battleground is. you can see, tyler, a lot of traders have positioned themselves for that possibility of a move. >> thank you very much. let's look at stocks at this hour. they are generally lower. the declines modest coming off equities' third biggest weekly gain of the year. you see the dow industrials, the s&p app, and the nasdaq all off about one half of 1%. let's get the trading action now from bob pisani on the floor of the new york stock exchange. hi, bob. >> hello, tyler. the markets are not afraid of a fed rate hike. in fact, they seem to be implying they think it's very unlikely that's going to happen. they're more concerned about the slowdown in china and again that's the story today. look at the s&p 500. we started on the downside and basically we've been on the downside. we're at the lows for the day. let's not quibble about a couple points. moderate trading range here b 12 or 13 points. that's a typical days action. look at the market this is the

middle of the day. china came out with numbers overnight, retail sales were good but the industrial output missed the forecast. that's where the commodities all come in. we need some volume. we have one of the lighter volume days wee seen we've seen the last several weeks. industrials on the weak china numbers. all these big industrial names, typically down about 1%. the big commodity names. we're seeing copper down today, aluminum, nickel, and zinc, all the base metals down on the weaker china metals. commodity based stocks like nucor. finally even here in the united states, we're just seeing some general lack of buying interest. the volume is not heavy in retail stocks like coach or target or fossil or macy's. not heavy at all. but what you don't have is any real compelling reason and josh brown talked about this, no

compelling reason to own them right now, to go after them and i think that's the problems. we have to get a little more conviction. maybe the fed will help us out this week. >> i'll pick it up from there. thank you very much, bob. the shanghai market ending down more than 2.5% overnight on that week economic data bob was talking about. and it really hasn't been an easy ride for a lot of emerging markets over the past one year. so what happens to the ems if the fed begins raising rates? joining us is david reedle. good to see you, david. a lot of concern about any potential fed move is related to the currency impact on ems, right? but is there any guarantee just because the fed might start hiking rates that the u.s. dollar will keep on gaining? >> not necessarily. we think some rate hikes are already priced into this big move in the u.s. dollar you've seen over the last year and a half or so. so we think it's a bit of a buy on the rumor, sell on the fact situation where people will allow the dollar to trade flat to down after they start dige

digesting the rate hikes. >> just back up a second. how many rate hikes are priced into the u.s. dollar's upward move? >> i think probably two or three, 25 basis point hikes are built into the big move in the dollar. >> if we do see the usa dollar trade flat to down, what impact will there be on the investment thesis for emerging markets? >> i think there can be a big sigh of relief because commodities have been badly hit by the strength of the u.s. dollar. people have been concerned about the impact of the stronger dollar on u.s. dollar debt that some of the emerging market companies and countries have built up over the last year or so. so i think it's going to be a sigh of relief. we have to look back to 2004 to 2006 period to see the last series of rate hikes. emerging markets did great during that two-year period. the emerging markets doubled during that period in the face of 17 consecutive rate hikes, so i think the emerging markets can do very well if the dollar trades flat to down and people digest -- start digesting the

rate hikes. >> the emerging markets are often lurched together, but at the same time they're also different. the are there any that stand out to you. places like hong kong that's down 20%. do they look good? >> i think there's some very good companies in hong kong. it's a great way to get china exposure. we would not recommend people going into shanghai and buying those volatile stocks. we have some high quality companies listed just in new york that give you good china exposure as well. we'd be buyers of some of the big brand names in tech especially that can benefit from a stronger than expected china. >> can i put you on the spot about alibaba in light of the report from barron's suggesting the shares could go a further 50% lower from here? do you like baba? >> i do like baba. i don't like the corporate governance at baba but i love the strength of their business. they're totally ubiquitous in the ecommerce business in china. they totally dominate in that space. i think it could almost double

from here so i'm going to have to take issue with barron's view. >> what about baidu? >> it's the going of china. it's very strong. we think it's a good company that could go up higher. >> david, thank you for your thoughts. >> shares of apple higher in today's down trade. the tech giant seeing strong preorders for its new iphones. the stock up 5% over the past week and josh lipton is following the story live for us from san francisco. josh? >> well, tyler for apple investors, the big question is whether the tech giant can grow iphone units in the quarters head. today apple could have provided some color on that question when it told us what demand has been like for that new 6s and 6s plus. customer response to iphone 6s and iphone 6s plus has been extremely positive, the company saying. in preorders this weekend it was very strong around the world. we are on pace to beat last

year's 10 million unit first weekend record when the new iphones go on sale september 25th. the company went on to say that online demand for the 6s plus was especially strong and exc d exceeded the company's own forecast for that preorder period. apple stock up strongly over the past five days. still though down more than 10% from its 52-week high, and in part that is because investors are worried about growing iphone units in the face of tough comps and a slowing china. apple though now saying it could break those same records with these new iphones. the team at rbc agrees saying apple could sell 12 million iphones over that first weekend. sales start next friday so stay tuned. guys, back to you. >> all right, josh, thank you very much. let's get a check on some other big tech movers at this hour and courtney reagan is the person at nasdaq. >> good afternoon. apple does have a strong influence on the nasdaq indices but it's not enough to push that comp higher.

we're at about the lows of the session. look at yahoo! shares down almost 3.5%. one of the biggest losers on the nasdaq 100 due to its stake in alibaba. you were just speaking about that with a previous guest. remember that barron's article speculated a lot of negative press and alibaba shares could possibly fall 15%, that's what the article said, i'm not saying it but as a result yahoo! shares are lower because of its stake in the company. and look at go pro. we have a "wall street journal" article saying it's doing much better and it's perhaps worth buying at these levels. that's moved shares higher by 2.3%. there are many components that go into a go pro. one of them is the trip. amberella is one of the components doing better on the back of the go pro shares higher. up almost 4%. they were actually up almost 5% earlier in the session so it look as if we're back to a market where not all tides will

lift or sink all the boats. we're moving again on news and fundamentals. back over to you. >> okay. thank you very much courtney reagan. oil is under pressure today partly due to that weak chinese data. jackie deangelis joins us from the nymex. >> we are seeing pressure to kick off the week. concern about china gdp not coming in as expected is definitely one of the factors. also a little bit of a stronger dollar. we did also get opec's monthly report and what we got in that reading is non-opec supply is likely to come down. that's good news. at the same time they took their demand forecast for 2016 down as well. so, again, the equation is not going to work out if they both go down. august opec production was 31.5 million barrels per day. that is high. for those expecting to see iranian oil come online as well, that leads to more supply globally. last week's factors still having an impact as well. that goldman sachs note calling

for $20 still leaving a chill in trader's blood. back to you. >> now to the latest on those deadly wildfires out west. one person has been killed, several firefighters injured. hundreds of homes now have been destroyed in california's fast-moving valley fire. the brunt of the damage to property is caused by one blaze that broke out saturday near napa valley outside sacramento. thousands have been evacuated and the 50,000-acre fire is moving in multiple directions as fast, some say, as any in decades. about 4,000 firefighters are battling that blaze. the wildfires sweeping across the drought-stricken western u.s. this year could end up being the costliest on record. terrifying stuff there. wish them the best. let's check out shares of alibaba so far this year. everybody loves their baba, right, mandy? down 40%.

trading below its ipo price and now fears that chinese ecommerce giant could take another major plunge from here. morgan brennan is following the story. >> it was the subject of a bearish cover story in barron's this weekend. shares down nearly 50% from their november high and still the publication arguing they could fall another 50% so what's behind the plunge? are shares really going to fall further? warns you about incoming cross-traffic. cameras and radar detect dangers you don't. and it can even stop by itself. so in this crash test, one thing's missing: a crash. the 2016 e-class. see your authorized dealer for exceptional offers through mercedes-benz financial services.

welcome back to "power lunch." check out what's happening right now with the markets.

here hovering near hour worst levels. the dow is down 90, 91 points. the s&p 500, the nasdaq all making these lows here as we get towards the worst points today at least for right now. among the standouts, at least from the industry side of things, steelmakers trading lower today as growth in china's investment and factory output missed last month. china is one of the biggest consumers of steel. u.s. steel, ak steel, nucor, steel dynamics all down 3% to 4%. that industry will be a big focus especially around the chinese economy. back over to you. >> thank you very much, dom. marvel technology getting a downgrade to equal weight by morgan stanley. deutsche bank planning to slash a quarter of its workforce, 23,000 jobs, mainly in its technology and back office operations. that stock is down more than 10% in the past two months.

and mylan offering a tender offer to acquire perrigo. perrigo is urging shareholders to take no action pending a board review. alibaba is down. if y new fears the stock to suffer a major plunge from here. morgan brennan is covering the play by play. >> alibaba is in the spotlight after a barron's story saying shares could fall 50% from current levels. the publication outlining several reasons including increased ecommerce competition, scrutiny surrounding the company's governance and culture, and pressures could come under share when the lock up expires this sunday. in response to barron's assessment, alibaba slamming the story in a letter to the editor saying the report contains

factual inaccuracies and selective use of information and the conclusions he, meaning the rorner, draws are misleading. you can see that four-page response on cnbc.com. outlining seven examples of errors including how the price to earnings multiple was calculated. still, you have a number of factors that have already been weighing on the stock. the lock up expirations. we've seen disappointing earnings and a china softening economy. even alibaba recently said the total amount of goods bought on its platforms, it's gross merchandise volume for the current quarter will be lower than it initially expected. so these factors have already contributed to a steep sell-off. shares of alibaba are currently trading around $62. that's lower than the ipo price and it's already down about 47%, 48% from the november high of $120. so barron's is talking about a 50% drop. >> from here. >> we've already seen an almost

50% drop. >> thank you very much. >> let's get to sharon epperson with breaking news. >> mandy, the securities and exchange commission has obtained a $30 million settlement from traders who profited on a hacked news release. we're talking about a ukrainian based company and its ceo who have agreed to pay $30 million to settle allegations that they profited from trading on nonpublic corporate information hacked from news wire services. you may recall in august the s.e.c. announced charges against 34 defendants who allegedly took part in a scheme where two defendants hooked in a wire service. this investigation is ongoing, they're still looking at litigation against the remaining 32 defendants charged in this case but we have a $30 million settlement so far with the ukrainian-based company and its ceo agreeing to pay this settlement in light of the hacked news release charges. >> thank you very much for the breaking news. call up a game of drones.

major u.s. defense companies positioning themselves to cash in on this booming business. jane wells is in los angeles. >> mandy, fly or die. defense companies need to find new needs and new markets for their uavs and in one case that may be trying to shoot down a manned aircraft program. we'll have that after the break. proud of you, son. ge! a manufacturer. well that's why i dug this out for you. it's your grandpappy's hammer and he would have wanted you to have it. it meant a lot to him... yes, ge makes powerful machines.

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active management can seek to outperform. because active investment management isn't reactive. it's active. that's the power of active management. defense companies are doing everything they can to adapt to the changing defense environment, including moves into the exploding commercial

drone market. our own jane wells is in los angeles now with how one major player is trying to keep its major drone program alive. jane? >> hey, tyler. the northruop grumman global hak has flown 150,000 hours. at any given moment up there circling and watching. to save money they wanted to ground the fleet. they are pushing to have sensors added. the global hawk will soon start test flights with some of the same sensors the u2 has. >> since that point this time we've resurrected the system and we're now flying more hours in fy '15 and we through in all of fy '13. >> now, northrup is trying to figure out how it can exploit the commercial markets, but, you know, i mean, the global hawk is

really expensive and complex. it may be a matter of selling nonclassified portions of the technology for things like replacing one pilot on board on long-range flights. i asked why it was taking so long to move from one operator to several at once? >> it's more of the interface between the machine and the human, making that more intuitive and the ability to respond to real world situations. i believe we'll have that within the next five years. >> by the way, lockheed martin not giving up on the u2. says it's been doing the job for over half a century and it's already paid for. >> thank you very much, jane wells. >> love the name, nick jaggers. let's see how the bond market is setting up for this important fed week. rick santelli is back and he's in action at the cme. hi, rick. >> hi, mandy. whether investors want to admit it or not, if you look at an intraday of ten, it's a pretty

compact range and 216, 217 is basically unchanged on the year. so what do treasuries think about thursday's meeting? well, it's anybody's guess, but we're not at 18,000 in the dow, we're at 16,3000, so definitely that market has taken some notice of what may or may not occur on thursday. and if you want to look at september, month to day charts along the curve on the dollar index, it's very enlightening. if you look at a two-year, we are flirting with a small change. 66 is unchanged on the year. ten-year about a ten basis point range. by the way, bund yields are a third of our ten-year note yields and they've had a 15 basis point high to low yield close range for the month of september thus far. 30-year bonds about 10 basis points. the only one that is giving you a clue is the dollar index and its weakness speaks volumes about the market not being ready

for any type of rate increase. even if we do get a rate increase, if a quarter to a half a point on the overnight fed funds rate is enough to make the fed stop in their tracks, there's a whole lot more to worry about than what their ultimate decision may be on thursday. back to you. >> that is very true, rick. very true. okay. gold prices are getting ready to close as we speak. you might remember on friday they fell to their lowest in about a month. right now they're marginally higher at $1,108. that's gaining nearly $5. jackie, tell us more about what's going on with the precious metal from the nymex? >> the precious metals are getting hit. it's that stronger dollar and fears of china that are bringing the whole complex down. gold is able to sti ovay over t $1,100 mark. if we don't get dovish news from the fed, gold will probably go under the $1,100 mark. for now it's holding because it's not impacted in the same way that the industrial metals

are. >> thank you very much. the man who predicted the housing bubble is now worried about the stock market saying it is overvalued. is he right? dominic chu taking a closer look. dom? >> some say yes, some say no, but the reality is everyone has got an opinion on whether or not stocks are overvalued right now. the bears and bulls both have cases. we're going to show you why maybe they could be correct, both sides of the equation. that's after the break. at ally bank no branches equals great rates. it's a fact. kind of like mute buttons equal danger. ...that sound good? not being on this phone call sounds good. it's not muted. was that you jason? it was geoffrey! it was jason. it could've been brenda. this just in: 50 million customers' data was not compromised this morning in a security breach that didn't happen. wall street. not rattled. at all. no. not at all. not at all. i mean, look at the day. sir. sir. what went right? what went right? everything. thank you. with threat intelligence, behavioral analytics,

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i'm sharon epperson and here is your cnbc news update. a white male professor in his 50s has been shot and killed by a shooter at delta state university in mississippi. no word on the identity of the suspect. the campus remain this is lockdown mode. democratic presidential hopeful bernie sanders taking his message to liberty university in virginia today. he spoke to a packed auditorium at the christian school acknowledging the differences his views on social and economic issues have with many in the crowd. in a paper published in the journal nature climate change, scientists estimate that the

sierra nevada snow pack hit a 500-year low in 2015. snow pack is a key factor in california's water supply. melting snow provides the state with a third of its water. arnold schwarzenegger is back as the new host of "select apprentice." he replaces donald trump when it returns to the network for the 2016-2017 season. and that's cnbc news update at this hour. back to you. >> okay. thank you very much, sharon, for the headlines. markets right now are currently moving to the downside but we are coming off a good week. the dow is currently sitting at 16,343. the nasdaq and the s&p are both also down about half a percent. but let's get more on the trading action with bob pisani on the floor of the stock exchange and courtney reagan joining us in times square at the nasdaq. bob, kick it off. >> our problem is not the federal reserve. the market is not that worried about the fed. maybe they should be but they're not. they're worried about china, and you can see this in the action in the etfs today.

we're having fairly heavy volg in the china etfs but particularly anything having to do with mainland china. all of them are down about 5%. that fxi, that's also down, but they invest in big cap stocks that are primarily hong kong-based. they're making a little bit of a distinction. but china is what's worrying things. overnight we heard from china their industrial output misforecast and all the base metals are on the downside. 2% for copper, zinc and aluminum. that's affecting all the stocks in the united states. so the weak sectors are material names, industrial names, and even energy names as oil is also down as well. i mentioned the problem is not really with the fed. you can see this in the vix which is the volatility index. you would think it would be spiking up a little bit. this is the last five days but we've been in a trading range between 23 and 25 which is on the very low end of where we have been. we spiked over 50 not long ago.

so bottom line is we're te telegraphing markets will be fairly smooth in the next few days. >> thank you very much. let's check in on what's happening with the tech stocks with courtney reagan. >> good afternoon to you. the nasdaq composite sitting right now at the lows of the session, down about 0.6%. apple is still having the largest pulling impact on the nasdaq 100 to the positive side today. this after the company said sales of its new iphones were on pace to beat the 10 million market it logged last year. shares are up 1%. bob talked about china weakness as it remain this is focus. so, too, do shares of baidbaidu. we continue to watch that weakness as the china story and data continues to unfold. marvell is in a league ever its own.

down about 3.4% but this is because the chip sector's company came out and said its audit committee is conducting an investigation into accounting issues. it's gotten several down grades today. shares down more than 3%. other chipmakers like kla and xp semi, amt, broadcom, they're among the nasdaq 100 leaders. that's why marvell is a little bit of a difference maker in that spice. >> court, thank you very much. robert shiller who predicted the housing bubble making a call on clinton stock market saying its overvalued and creates the risk of a significant bear market. not the first time he said that. in fact, he was on cnbc on august 21st. listen up. >> valuations are high, quite high by historical standards. only been a few other episodes in u.s. history when they've been this high. it could be followed by a series of bigger and bigger moves. i have a general bias toward

down because the market is overpriced. >> so where do we stand in terms of valuations? let's bring in dominic chu who has been looking at this. of course, the market is less overvalued than it was back on august 21st. >> i mean, it's interesting whenever we bring up valuation discussions, you have always got to frame it around a time period. you can find a statistic, find a valuation that pretty much tells the story you want to tell. for robert shiller, he's probably looking longer term and saying this is a little overextended. if you look at the s&p 500 overall, that 1950 mark, it seems kind of fresh in our memories, right? the 666 intraday low we saw during the financial crisis on the s&p 500. we pretty much tripled the stakt sin stock market since then. if you take a look at historical price to earnings ratio and we've done so ever since the year 2000. that's going to be the key since around the peak of the overall internet of the dotcom double --

>> this is the pe ratio -- >> the blue line -- >> forgive me for tell straighting. >> by all means. you can see it was closer to 30 back in 2000 before things fell off. we've seen it drift lower and you can see here near the financial crisis, we traded -- >> this is trailing earnings forward. >> trailing earns. not proprojections. this is actually the earnings and the price on top of that. today we're 16.5. that's where the s&p trades. we were cheap compared to where we were back in 1999, 2000. more expensive than during the financial crisis. on average, that's the red line. on average since 2000, so over the past 15 years -- >> we're on average. >> we are on average. we're sitting here just at around the same level we have been on average for price to trailing 12 months earnings we have seen over the last 15 years. here is where it gets -- >> so that undercuts professor

s schiller. >> perhaps. if you look longer, longer, longer, 50, 75 years, things change. but that's since the millennium. check this out. here are a couple sectors. we mentioned that 16, 17 range for the valuation for the index. right now you can see, energy type companies, those type of companies, trade around 15 times earnings. health care stocks traded around 20 times earnings. so energy related trading perhaps a little bit more of a discount. we know the energy story, sliding oil prices and everything else, and health care stocks trading more than the overall market is worth. so a couple sectors to focus on. banks always fall into that undervalued category but people always have questions with regard to earnings and whether the earnings are of the same quality, whether they reflect certain one-time

>> when you draw the historical experience back a little further than dom and tyler just did, we have the market overvalued, but overvalued relative to historic trends. when you combine that with waning earnings growth and the seventh year of a bull market,

it's really the combination of those two things that leads us to be suspect of the likely future robust performance of markets. >> you're really worried about the "e" side of the pe. >> or the "e" side. >> would you agree or disagree with that, sandy? >> well, i'd agree in part but not in totality. i think one of the things tyler alluded to was the interest rate level. and you have to recognize the interest rate level reflects inflation. so in periods of low inflation, the valuations are actually right now probably cheaper than you would expect when you look at periods of low inflation. so i'd actually make the argument that inflation tends to justify a little higher valuation because we're not having to chase an inflation bogey and right now we're sitting a the a number at around 16-plus and relative to low periods of inflation it's not uncommon to see the levels at 17. i agree that the market is going to get much more selective in here and you can already see that. even on your programs constantly

talking about companies that miss the revenue number and they get really punished. so the market is starting to discriminate by earnings. they're starting to discriminate by revenue growth. to add to scott's point, i think that's going to be an important play over the course of the next year. >> and already you're being quite discriminating yourself. you have just a couple stocks you like at these levels. >> that's right. we're looking at companies, acuity brands, about $9 billion. really good margin improvement. really good top line. kind of explosive earnings underneath it. now, it's not a cheap stock, mandy. the multiple is pretty expensive but on a careful entry point we think an interesting name and tripoint homes, a home builder, a very cheap valuation with cheap low cost land on the books they can unlock the value of at only ten times earnings. you do need to be more selective but there's still good opportunities. >> i know, scott, with he have to leave it there, but you know

you like the energy sector. scott and sandy, thank you for joining us. you can go to powerlunch. cnbc.com and see what they think about the rate hike. american airlines accidentally sent a plane not certified for long haul routes over the water from los angeles to hawaii. how did it happen and what could have happened had something gone wrong in the air? we have that story for you in two minutes. excellent looking below the surface, researching a hunch...

and making a decision you are type e*. time for a change of menu. research and invest from any website. with e*trade's browser trading. e*trade. opportunity is everywhere. big day? ah, the usual. moved some new cars. hauled a bunch of steel. kept the supermarket shelves stocked.

made sure everyone got their latest gadgets. what's up for the next shift? ah, nothing much. just keeping the lights on. (laugh) nice. doing the big things that move an economy. see you tomorrow, mac. see you tomorrow, sam. just another day at norfolk southern. solara has agreed to be acquired by vista equity partners for $3.74 billion in

cash. those shares are up 8.5% now. h & r block downgraded to neutral from buy. a valuation call there. and google named john crafic as the chief executive of its self-driving car project. he is set to begin his tenure in late september. airbus begins production of the first a-320 to be built at the companies first and new final assembly blaem plant -- a plant in the u.s. >> reporter: a huge day as they open a final assembly plant. this is airbus' second plant outside of europe. they have one in china and now they'll have one in alabama. a-320s are what they're building.

almost all of them will be going to north american airlines though some could be exported. when you look at the models that will be build and add them to what airbus is already building and you can see that record delivery pace the company has been on will likely continue growing over the next couple years. it's costs because of nonunion labor will be competitive initially with europe and eventually could be below what it costs to build a plane in europe. >> we believe that in a few years we will be in the same ballpark. so it will be a cost efficient assembly line probably from 2018 onwards. >> take a look at shares of boeing and airbus over the last three years. airbus actually outperforming boeing. the a-320 will be built in this plant, the first one coming out next spring. full production in 2017. that's the story from here at airbus' plant in mobile. guys, back to you.

>> thank you very much. let's stick with aviation. american airlines admits it flew the wrong plane from los angeles to hawaii last month. the plane was not authorized to fly that distance over water. the mix-up happened just days after the airline did start to fly similar planes and airbus 321 on that very same route. let's bring in michael boyd, aviation expert and chairman of the boyd group. welcome, good to have you with us, mr. boyd. why would some a-321s be certified and others like this plane not. >> twin engine airlines over water, they get additional certification because if you're flying coast to coast which is really a longer route than going to hawaii, you can land in kansas. you can't land in the ocean very well. but what it is is really just an additional incremental kind of technology at the thut on tthey airplane. >> it wasn't a question of the plane not being able to cover

the distance, number one. it was that particular plane was not equipped the way it should have been should something have happened in midair. am i understanding that correctly? >> i suspect what i picked up, if it had ditched, it would have been the same situation either airplane. the etops classification simply makes that airplane more reliable, and in this day and age more reliable on an airbus is a very small margin. so it is a screwup on a american's part. they're going to have to answer for that -- >> so what do you think happened? was this a clerical screw up? somebody just didn't know. somebody said we're starting to fly the 321s over there is they're all okay? what do you think went wrong? >> with their sophistication, it has to be some clerical error. this is one of the most sophisticated airlines in the world and to miss something like this which is major on paper really says something went wrong in ft. worth where they have their operation center. >> were passengers at risk in

any -- elevated risk in any measurable way, mr. boyd? >> no, i don't think so. today an a-321, that brand new airplane, whether it's certified etops or not is a marginal issue. they were not at risk at all. t the point is american just didn't do their job right. i can guarantee it will not happen again at american airlines. >> thank you very much, mr. boyd. i have enjoyed your comments about the united and smizek thing as well. >> still ahead, six hot stocks and three cold sectors you may want to take a closer look at and reasons to go bullish on housing. that's all coming your way. plus -- i'm lizzy whithome at pandora in oakland. i'm going to give you a behind the scenes look.

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pandora, love pandora, celebrating its ten-year anniversary. since the company went public in 2011 it's trading higher by 5%. today we take you inside the company to see what it's all about if you work there. music is everywhere, the free avocados go fast. it's this week's office envy.

>> hi, i'm lizzie whithome senior vice president at pandora. i'm going to take you on a behind-the-scree behind-the-scenes tour. >> we started very small and we're now almost 1,000 employees in this office. we have an open office at pando pandora. i'm walking through the strategy team. over here we have legal. all the floors above us include sales, marketing,p r, engineering, product and our music analyst team. we rely heavily on conference rooms but we want to bring the music into the space. we've been asking people their favorite conference rooms. >> tupac and too short. >> this is one of the common rooms where people can bring their lunch, brung their laptop and just have a place to relax. skittles are a huge favorite. number one favorite flavor in the kitchen. i'm a mom of three boys. there's a bit of an avocado race around here whereby people try

to get in early to get the avocados. we have so much fun hidden art here in the office. this is the dance pad wall. the pop and lock. the twist. the harlem shake. my favorite is for sure the robot. these are the most common words in pop song titles. my favorite is all the way down here, fool. i pity the fool. one of the fan favorites in this office is our backstage area. when musicians come to town, we transform this space into a concert venue. i hope you enjoyed the pandora backstage tour. thumbs up cnbc. >> very cool. nice place. for more on our series and to get inside some of the best workspaces we have found, head over to powerlunch.cnbc.com. let's go to dominic chu for a market flash. jeev with a cool office here but that one was pretty awesome. just two stocks hitting new fresh 52-week high this is the s&p 500 on this particular down day. you got cruise lines, royal caribbean, also data center

company e quinn nix hitting highs. >> i'm still trying to work out what are they doing with the avocados? >> guacamole. >> biting into them like an apple? stocks struggling but off their session lows. utilities are the best performers. apple and merck leading the dow. among the etf movers, xme down 2.5% and xly, consumer discretionary down a percent. bob pisani pointing out heavy volume in china related etfs because of the data dump that came out last night weaker than expected. if you missed any of the big stories you can visit powerlunch.cnbc.com. tyler? >> mark cuban says he would

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coming up, all hour long we've got more stock picks and investment ideas than you can shake a stick at. we're always looking to help you make money. forget warm hands, cold heart, what the government just did that may change the way your kids pick a college forever and maybe put all those college rankings out of business. truly is a game changer. what it is and why it matters coming up in a couple minutes. >> i know you don't throw the word game-changer around -- >> i hate that phrase. >> it must be important. >> game-changer. >> mark cuban is not shy about making bold statements and he's just done it again. in an e-mail exchange with cnbc, cuban revealed his thoughts on the presidential race and that if he were in the race, he would crush donald trump. eamon javers is live in washington with that story. those are fighting words. >> that's absolutely right. mark cuban says he has no plans to run for office but he's a guy who clearly has been inspired by the donald trump presidential

campaign. he likes that donald trump has proven that you don't have to have a squeaky clean past in order to run for president. he likes you can be a billionaire and cuban is and run for office. here is what he told me in this e-mail exchange over the past week or so. he compared himself to hillary clinton and donald trump. he also used the term three comma potus, as in a billion dollars. he said if he have a three comma potus it would not be long before the office humbled him or her. he also said that in comparison with hillary clinton and donald trump. he said if i ran as a dem, i know i could beat hillary clinton, and if it was me versus trump, i would crush him. cuban also said that he's got an idea of what his platform would be. he said he doesn't want to run on social issues if he ever were to run. he'd leave that up to the family and the individual. he wants to run on economic issues, including most importantly economic inequality, college debt, overly complicated taxes, and two other interesting ones. he also said foremost on his mind are cyber security and also

broken equity markets. he thinks that the stock markets have been taken over by hackers in his words and he'd like to focus on that. a lot here. >> if mark could get over his self-confidence issues he could actually become something, right? >> he said that in his e-mail. he said we billionaires have a lot of confidence bordering on a arrogance. >> you can't have a shy retiring flower as the leader of the free world. >> how many more billionaires will we see on the campaign trail in 2020. has donald trump kicked in the door? >> backlash against the career politicians. thank you very much, eamon. >> that will do it for the first hour. >> a powerful second hour coming your way with brian. >> thank you very much, guys. appreciate it. noon in denver, 2:00 p.m. in maryland. the dow and oil are lower. happy monday as we continue, yes, to count you down to that huge fed meeting on thursday.

that's when we could, could see the first interest rate increase in nine years' time. let's forget about the fed for a second because rate rise on thursday or not, there are always many opportunities out there for you and your money. so let's find some, shall we? bring in mark keisel from pimco. welcome back to the program. here is the obligatory fed question. will the fed raise rates on thursday? >> hi, brian. we think the economic data supports a rate rise but we also think that the risk management with the global uncertainty and what's happening with china and inflation argue that they're probably going to wait. so the u.s. is doing good but globally we think the risks are such that they'll probably delay. our best case right now is that they'll wait until december to lift off. >> got that out of the way. let's find some opportunity. why are you so in love with the housing market? >> the reason why we like housing is the fundamentals. first, inventories are basically

near 15-year lows. secondly, we're forming now thanks to very strong job creation, almost 3 million private sector jobs, we're forming 1.5 million housing -- household formations and we're only adding 1.2 million starts. so basically demand is soaking up supply, and importantly there's pent up demand on the sidelines. so you've basically got a third of the 18 to 34-year-olds living with their parents and then most important for first-time buyers, you're now creating basically 700,000 jobs in the 25 to 34-year-old cohort. that's the strongest it's been in 15 years. so basically very tight supply and overwhelming demand coming online. >> but there seems to be this theme, mark, that millennials, they don't want to own a home. they want to rent forever. it's the sharing economy. i assume you are discounting that. >> we are discounting it, and, in fact, if you look at the breakdown of the starts data, what you will see is more starts

occurred in multifamily. so apartments have been very strong. you have seen that in rents. bu peop but people absolutely want to own a house. credit availability had been very tight. if you look at the recent bank loan data from the big four banks, they are starting to extend credit. mortgage origination growth was up double digits year over year. what you will see is people who are renting gradually start to buy over time so we are confident that trend will change. >> but, mark, does the pent up demands or willingness to expend credit does that get impacted by all the reasons you said the fed might not raise in september, namely emerging markets concerns when it comes to growth in china and brazil? i mean, aren't these factors as well or you see that there is willingness to extend credit and the pentup demand no matter what happens with the fed and no matter what happens with emerging markets? >> sure. melissa, basically we see a fed that's going to lift off and

raise rates, but importantly the pace of their rate hikes is going to be very slow. we don't see longer term interest rates going up that much. the curving will likely flatten and, yes, we see the fed getting to, say, 75, 100 basis points by the end of next year. importantly, mortgage rates are very low. at 4% today they actually could go up 2% which we're not expecting just to return to long-term average affordability. the reality is that you have 3 million private sector jobs. that could overwhelm a modest rise in interest rates. >> i guess the question, mark, didn't really have to do with interest rates per se, but the fact that you say the fed is concerned or could postpone liftoff because of concerns about emerging market growth. could those kerns gconcerns get point where bank starts to rein in risk and not extend credit or corporations decide not to hire as windchill therefore impeding job growth which enables that pent up demand to buy a house? >> sure.

ultimately the international factors are going to be relatively minor when you look at bank balance sheets and lending and if you look at corporate profits, they're likely going to slow somewhat, but the reality is that wages are actually picking up. so this is the first time we're going to see probably in a decade where labor finally gets higher wages, and that is ultimately what's going to support housing. >> what's the big variable, mark? what could be the thing that makes you wrong? >> what would make us wrong is if inflations surprises too much on the upside. that would cause the fed to have to hike rates higher and you could see then rates go up violently and any violent increase in mortgage rates would slow housing, but, again, that's not our base case. we think inflation is only picking up gradually. >> mark keisel, it was a pleasure. >> thank you. let's get another check on the markets. the dow is in the red off the session lows here.

that is the same for all major averages. gold is trading higher. wti and the oil market is where the action is. wti is down by 1.33%. let's get more on today's action. bob pisani is on the floor of the new york stock exchange. rick santelli is in chicago. >> the important thing is we are off of the lows. happened about 40 minutes ago. no particular sector moving to the upside. energy and materials have been under pressure all day on the weak china data. as i mentioned, china's data weighing on commodities and industrials. the breadth has been 2 to 1. we need some volume. we're on the light side whether it's because of the jewish holidays or not, we definitely need more volume. china has been weak here and all throughout the day any china etfs that have got volume, they are on the weak side here. all of those big china etfs are down about 4%. some of the mainland stocks in

hong kong down 2% or 3%. commodity evidentfs have had a problem throughout the day. metals, oil, stocks have been weak as oil has been on the downside. back to you. >> bob, thank you very much. let's now go west to chicago and get to rick santelli. how is the demand for bonds these days? >> you know, the demand seems to be fine, but what really seems to be perking up a bit is a little bit of anxiety. we all know what's coming up on thursday. do we have clues? look at an intraday of two-year note yields. they've climbed back to the higher yields we've seen, 72, 73 basis points. nothing has really changed. two day of 10s, 10s are back close to 220. two-day chart puts it in best perspective. let's go all the way back to january of 2011 on 10-year note rates. notice that 3% line. since mid-2011 there's only been

one settlement above 3%. maybe the reason rates aren't moving higher is the 20-year chart shanghai composite shows you the disappointment there. we want to take mention that the 30-year bond yields are getting close to their 3% level, 296 high yields of the day. all because traders are just unsure what janet yellen and company may do on thursday. >> perspective is it's mid-september and the cubs would be in the playoffs if they weren't in the division that they're in. that's perspective. >> a one-game playoff between some of the best records in baseball. the wildcard, whole setup has to be redone, buddy. >> go get me a goat, rick santelli. thank you very much. mark keisel laid out interesting ideas in housing and mortgages. now let's focus on stocks, specifically sectors you might want to invest in through mutual funds or etfs. bruce biddles is joining us.

bruce, one thing that's interesting about what you like and more importantly don't like is we've had a lot of guests on who said the oil stocks, they've been slaughtered, they're good bargains, good values, we're buyers. you are not. how come? >> typically after a hard smash and particularly at this time of year when you have to consider that tax law selling is just ahead, we think oil prices are lately to remain low and i think these oil companies are going to continue to find profitability difficult to come by. so at least for the rest of the year we're going to avoid energy stocks in most cases. >> so you're not in this they're good values just because they're 50% off of what they were last year camp. >> no, because i think the volatility in these oil markets, we're not sure that oil actually has hit a low. now, it certainly looks like it has just under 44 so recently, but it could still go lower if the global economy continues to

slow. >> low oil prices usually mean low gas prices which means more money in people's pockets. i'm not in exact favor of that just basic thesis, but do you like the consumer discretionary stocks in part because of that? >> yes, i do. i know there's been some disappointment that the consumer has yet to really open their wallets even though gasoline prices have dropped this year, but i drove in from tampa last night late, and i passed a couple of gas stations where regular gas was $1.95. now, that's eventually going to put a lot of extra dollars in the consumer pockets, but on top of that, the improvement in the labor markets and the potential for wage increases going forward, those two items together, a tax cut and improving wages i think spells a lot of potential for the consumer discretionary sector. >> all that said, bruce though, your risk reward on the s&p 500 looks slanted to the risk side because you see the s&p 500 potentially testing and

consolidating about 100 points lower from where we are with the upside being 40 points from where we are. how do you trade that market? does that mean you're overall view of the market is sort of cautious? >> well, our overview of the market has been cautious ever since april. we are not market forecasters. we like to consider ourselves risk managers, and our weight of the evidence approach showed that the market had turned neutral in your opinion back in april, and then turned negative in mid-august with the tape breaking down. at that point less than 50% of the industry groups within the s&p 500 were in up trends. that told us the majority of sectors had turned down. so that turned our technical light from yellow to red. then the market plunged in late august and early september and typically when a market suffers a harsh correction, you go through at least a bottoming phase that includes several

tests of the lows. now, they don't have to go all the way back down to 1865, but i would think something under 1900 could be expected on the s&p before we get the all-clear sign. now, our forecast -- or our outlook for 1865 to 1990 is a short-term outlook. if we break through 1990 on the upside and the breadth of the market improves, we could turn more optimistic for a year-end rally which i think is most likely. >> end of year rally, not a buyer of oil and energy stocks. bruce, thank you. appreciate it. >> thank you. much more to do on "power lunch." on deck, the one chart that says now could be the best time to invest in one small part of the market. what that is ahead. also, six hot stocks and three very cold sectors. and it's monday. why not bring back a mystery chart. can you guess the mystery chart today in this stock is the best performer in the s&p over the last 90 days that has not been bought out. here is a hint.

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i'm a gas service my nrepresentative. n. i've been with pg&e nine years. as an employee of pg&e you always put your best foot forward to provide reliable and safe service and be able to help the community. we always have the safety of our customers and the community in mind. my family is in oakland, my wife's family is in oakland so this is home to us. being able to work in the community that i grew up in, customers feel like friends, neighbors and it makes it a little bit more special. together, we're building a better california. welcome back to "power lunch." apple says it is on pace to top 10 million preorders in the first weekend of sales for the new iphone. apple shares are up more than 1%. deutsche bank is reportedly planning to cut a quarter of its staff, 23,000 jobs. the cuts will come primarily in

layoffs in tech and a spin off of the post bank division. and a few stocks are touching new 52-week lows including helmerich & payne. >> if you're a believer in the little guy and you want to invest on america because these are all domestic companies, some of these beaten down names might be for you. dom chu is here to tell us why. >> some experts like to look at some indicators, leading indicators for where the overall market, the economy, may be heading and small capitalization stocks may be part of that story. tom lee earlier this morning on "squawk" talked a little bit about why he's watching small capsclosely. >> some things you look for to say a bottom is in are usually small caps outperforming.

they almost always turn up one day to two weeks before the actual bottom is in. >> is that happening? >> small caps bottomed versus the s&p on the 24th of august. >> all right. so the 24th of august, that's why he's watching it. that's right around here near the lows with he saw during the recent turmoil. if you take a look at the performance of the russell 2,000 small cap paired with the s&p 500 you can kind of see what he's going for or what he's looking at right here. these guys have now started to outperform. the orange line is the russell 2000 index. you can start to see here ever so slightly it's starting to lead its way out at least over the large cap s&p 500 on a relative basis. here is the interesting part. there's going to be one part of the market in the russell 2000 small cap stock universe that will get a lot of attention because it's been the hottest industry group in the market over the last two to three years. if you take a look at all the top performers sips we saw that low back around the 25th of august the top 20 performers

since that low, half of those stocks are in this one industry group, health care/biotech. that makes up for a lot of outperformers. so certainly traders are paying attention to what's happening in the health care side of the business. >> thank you very much. down 5.17%. when it comes to buying small caps, your next guest says the cheaper the stock, the more he likes it. let's bring in small cap manager bill hench. welcome to "power lunch." we just talked about this with bruce. cheap is in the eye of the beholder. some stocks are cheap for a reason. their business is slowing, earnings aren't growing, whatever. what are the key metrics you look at to separate the good and the underpriced from just the bad and the ugly? >> there's two things we do. one is valuation so we like things that are cheap on our metrics of price to book and price to sales and then just as importantly is the reason why that cheap stock is going to get

more appreciation. it's going to turn itself around or get noticed by investors. those are the two things you look at. as far as cheapness, you're at a great time. not only the charts that dominic showed, but if you break that down further and look at the value part of the russell 2000, you will see it's dramatically underperformed. there are terrific bargains. whole sectors haven't participated, and that concentration in biotech has really left a lot of names that are very, very good values. >> you know, it's interesting because we just talked about housing and home construction a bit with mark keisel of pimco. i don't know if you heard that video. he's very bullish. some of your picks have to do with construction, probably more on the commercial side. commercial metals. is this again part of that we're going to start building more stuff theme? >> we really are. and it's not just in the major cities, it's in all the tertiary

markets. you had a big delay in a lot of things being maintained or new builds, not just in residential but in nonresidential and you're seeing it now. so it's not something that's over the horizon or something we're going to get in the next six or nine months. you're seeing the building now and it's reflected in the earnings and the stock prices. much more so in the nonresidential though. >> the other two picks, general cable and microsemi. so commercial metals. we do have to leave it there. we'll see you soon, bill. thank you. >> thank you. moving on here on "power lunch," coming up, the five big cap stock calls that need to be on your radar right now. it's called "street talk." we do it every day. later on, we'll tell you about one of the biggest winners in the crude collapse. yes, winners. we're about to set sail again with our mystery chart. three of you smart people in the twitter verse have already gotten it. there it is, up 22% in three

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it is time now for "straet talk." analysts recommend dags and the stocks you need to know about

every day. are you ready to go? >> always ready, brian. >> let's do this. h&r block. the stock has done great, up 18% over 90 days, but btig said the run is done. they don't hate the company they just said the shares hit their target price and are fully valued. >> no catalyst until next tax season unless a lot of people out there are like me and they got extension and haven't filed yet. moving on to the second stock, mattress firm, tough month after disappointing numbers. raymond james sticks with its outperform rating but slashes the price target to 60 bucks from $73. the firm's view has not changed. high inventory turn and positive cash flows but here is something to watch. in the latest quarter comps in oil-affected markets were positive but then decelerated. there might be a lagging time

when the oil prices are hitting. >> this is what we tried to talk about for months. there's more money in people's pockets but if you're on oil worker and you lose you're job, you're not moving to the man camp, up don't need a mattress. >> stock three, ingredion. citigroup raising the target ten bucks to $100 per share. 20% upside from here. they say supply issues for corn sweetener are likely to raise the pricing. the average target is 90. citi a little more bullish than most. >> i'm said you said it was formally known as corn products. i was scratching my head. >> it's a transformer villain also. >> exactly. more than meets the eye, brian. next stop here silver wheaton hitting a new low. the rating goes from a market perform. there's a tax dispute with the canadian government. that's unresolved.

there's also uncertainty surrounding development of a project that's 13.5% of the net value. there's greater exposure to silver which has underperformed gold. >> you know how much it underperformed gold? it's been very dramatic. it's hard to believe this time four years ago it was at 41 bucks. it's at $14 now. we need the burl ives trade, silver and gold. today foundation medication, it's a biotech working on cancer cures. the company is the leading in profiling. the stock is it down big in the past three months because of earnings misses but the analyst says these are, quote, bumps in the road. $30 target on the stock. it's about in line with the average target of the analysts that target the name. >> watch this action tomorrow because there's an analyst day meeting so it could move the stock as well. >> that's it for "street talk"

on a monday. the final oil trades crossing for the sessions. let's get to jackie. >> we're trading at $44.02 right now. so the question is whether we're going to break under $44 at the close. but several factors impacting us to the downside. fresh news that's been out from the opec monthly bulletin and some rumors crossing the trading floor. we're going to have the closing price for you. we'll talk about what's impacting oil and where it could go from here. stay with "power lunch."

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i'm sharon epperson and here is your cnbc news update. the head of iran's nuclear agency says tehran is ready for international cooperation regarding the nuclear program. he spoke at the annual general assembly in vienna. mexico's foreign minister calling for a swift investigation into the deaths of two mexican nationals in egypt after security forces mistakenly fired on a group of mexican tourists. six survivors say they were bombed by helicopters and an aircraft. european airplane maker airbus formally opening its first u.s. plant in mobile, alabama.

the plant will build the a-320 jet for north american airlines with the first two planes going to jetblue and american. two men on a motorcycle narrowly escaping death when they were attacked by an elephant. the elephant walked onto the highway from a nearby forest. most people waited for it to go back into the forest but when the motorcycle riders tried to ride past it, they were attacked. they received minor injuries but their bike was trampled. and that's cnbc news update this hour. back to you. >> nature one, human engineering zero. thank you very much. appreciate it. the oil market closing for the day. let's get to jackie deangelis at the nymex. there may be some bulls. i don't know if there's elephants walking through the nighex. >> probably not today. oil prices closing $44 on the nose. we saw downside pressure, about 60 cents because of what's happening in china.

you had the opec bulletin out this month for their monthly bulletin talking about seeing non-opec producer having their supply go down. at the same time o pec is saying they think 2016 demand is going to go down. the products are falling out of bed. that's a demand issue and this is a rumor circulating across trading floors, the potential they're saying for an emergency opec meeting. the last we heard from saudi arabia they said there's no need for opec to meet in an emergency situation. >> interesting rumor. thank you very much. appreciate it. well, many stocks hitting new lows today but bp is hitting a new five-year low. the company formerly known as british petroleum not only at a five-year low but if you bring up a 20-year chart of the stock, which, of course, we can, with the exception of the mccondo oil rig disaster in 2008 along with

the financial crisis where the stock briefly fell below these levels, you are almost at a 20-year low for bp. a five-year low, but with the exception of that brief blip, really have to go back 20 years to see price this is low. just trust us on that one. this is kind of a radio segment on tv. there have been winners and losers in the crude price collapse. while a lot of focus has been on two is getting hurt, one group could be poised for more gains. morgan brennan has more. >> yes. in the first half of 2015, rates for very large crude carriers that carry up to 2 million barrels of oil peaked at 20,000 barrels a day. but by august rates had plunged 70% as demand slowed down ahead of refinery machines season. now, even now the industry gauged the baltic dirty tanker index is down 26% for the year. analysts say with crude below $50 again this sector could

experience its best fourth quarter since 2008 as china builds up crude reserves despite a slowing economy to take advantage of higher refining margins. chris weatherby at citigroup says rates are already rebounding up 50% from the august low with low fuel costs, the tail wands for earnings and a limited number of new ships coming on line. it could bode well for stocks like euronav, nordic american tanker, small cap names but ones that represent pure plays. t teekay tankers and tsakos could benefit. if iranian sanctions are lifted, that would push prices lower and further boost demand for crude transport. back over to you. >> morgan, thank you. apple shares are higher today. this after the company said sales of the new iphone 6s will likely break records but will the device get the stock

rallying again? let's ask the trading nation team. alex covered apple for jmp, zach care bell. alex, $150 price target. are you happy with the news and the momentum? >> very much so, brian. and we expected it coming in. the world's best smartphone just got better with the surefresh. we're seeing the longest lead times here on the higher average selling price 6s plus. this is another good news cycle for apple. share gains in north america, even more massively penetrating the china market right now. we think they are going to go on to another record december quarterback, perhaps 80 million or more in unit sales. we think that's a reason to buy the stock. >> what's the risk? >> well, i would say the risk is that we do get macroeconomic slowing as a repercussion to what's happened in china and maybe the numbers aren't quite

as good. but even if that does happen to be the case, jmp would argue this is one of the safest ports in the storm. it's trading at a discount to the market multiple. dividends are rich and incriesing the company has a fort res balance sheet. >> it's hard to see anyone who is not on an android or iphone. the two of them have the markets locked up. is that enough to make you like apple as an investment given that growth is slowing? >> look, i have known apple personally and the fact is almost anyone who has invested in anything if they're in an index fund owns apple personally. to some degree apple is a bellwether of the new economy. and what's interesting about that is there was the alibaba story in barron's. the negative case is the consumer in china and apple depends for a lot of forward growth on the consumer not just in china but throughout the emerging world. if that story is fundamentally broken, there may be a problem unless, of course, you treat the

smartphone as a utility. meaning the world could fall apart and people will still need to spend whatever marginal income they have and maybe income they don't have on these devices. so in that sense apple is driving whatever is driving the global economy forward, apple and its like are. so that's a reason to be in these names and the fact is none of us have a choice but to be in apple because if you're in any index fund, you're in it anyway. >> can i ask a totally random question? >> no. >> i will anyway. i'm going to do it. we never talk about india. the indian population is almost the same as china. their economy is growing. we never talk about the iphone in india. there's other parts of the world that can pick up the slack is my point. >> and that is an incredkrecrey important point. india has been resistant to foreign goods. they like if when stores show up there. that's going to change. there's a voracious indian

middle class that's not apple exposed. you have this vast market we haven't factored in. >> i guess it wasn't such a random question. >> not at all. >> thank you very much. for more trading nation, head to our website, tradingnation.cnbc.com. >> let's look at today's mystery chart. this is the top performer in the s&p 500 over the past three months yet its strong performance is not tied to any deal news. your next hint, this stock's growth can be tied to the benefit of lower gas prices. figure it out yet? if not, we'll reveal the answer straight ahead. plus, six hot stocks and three cold sectors. we're naming names when "power lunch" returns.

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three of the coldest sectors. first up, the materials sector. down 13% over the last 90 days but martin mare yeti and vulcan materials have done great. hopefully some infrastructure build coming out. next, the energy sector, down 21% over three months but cameron international and retine ri tesoro have done well. and finally the industrials. that group down 8% over the summer, but it's not all bad. m s masco up 11% and lockheed martin up 8%. >> alibaba falling today, down 40% since the start of the year. according to barron's there could be more tough times ahead. they're saying baba could fall another 50%. let's bring in scott kessler from s&p capital iq and rob sanderson. great to have you with us.

i know both of you don't particularly care for this barron's piece. scott, you said they're late to the game. it's easy to come out with an article after the stock is down 50%. rob, you said this is not a high quality piece of journalism. i don't want to indict the article but i want to go to some of the points. one of them is just the whole notion that china's growth is slowing and that somehow you guys with buy ratings think alibaba's growth can continue at the same pace. at the beginning when you first took on this name, was china's e-commerce growth and china's growing economy a part of a thesis for alibaba. did not matter if china's growth was going to slow 6% versus 7%? >> there's no question, melissa, that china's economy and growth in e-commerce was a factor, and it continues to be a consideration. the way we look at it is the economy is still growing there at a healthy clip, obviously not as much as it was, but what's important is the secular growth

in terms of the internet, in terms of internet users, in terms of broadband, and in terms of e-commerce we think is strong and intact. if you look at alibaba's growth in the june quarter on an adjusted basis, we saw revenues increase 36%. >> rob, what sort of adjustments do investors need to make out there when it comes to e-commerce projections for china if the gdp prints below 7%. with each passing data point it does seem to indicate china's gdp will be slower than even previously expected and that was already slow growth. >> i think the key considerations here have to be the growth in wages and disposable income, which is a derivative of gdp but still as scott mentioned i still think a rosy story. one thing that may not be getting as much attention as it probably should is the valuation of the currency because don't forget, the profits that are booked in china have to be

converted back to u.s. dollars for this u.s. denominated stock price and i think the currency peg is really one of the larger risks outside of the consumption growth in china. >> rob, how do you get to 105? what's interesting is both of you are positive on the stock but the price targets vary widely. scott, you had gotten $83 prior target. rob, you have $105. rob, for you what is the most important driver to the $105 price? >> it's growth. >> growth in what? >> it's a pe to growth multiple. under 1 still so healthy multiple but below what internet large caps have traded at. it's the consumption pattern, growth, and take rate. >> scott, for you what's the key driver for $83? >> the way we look at it is a pe and a pe to growth ratio and i think it's important to mention that the barron's article highlighted ebay has the most appropriate comp. we're looking at growth for ebay

at roughly 5% whereas we're looking at 25% for alibaba. so a 5x comparison there whereas the multiple is really just a third higher than -- >> what would you use as a comp, scott? >> well, i think the most appropriate comps frankly are the china-based companies that are really more diversified, conglomerate type companies, baidu and ten cent. those companies are trading between 20 and 30 times forward earnings. alibaba is in that kind of range. we think it deserves a higher multiple than its trading at now. >> rob, what's the most important comp to you? >> that group that scott mentioned as well as as a benchmark look at the high growing internet stocks in the domestic market and apply some discount to those multiples. >> guys, great to speak with you. thank you. rob and scott. brian? >> i'm not one to use the term game-changer.

in fact, i hardly ever use it because i hate it. it's overused and watered down. that said, up next, we have a game-changer for everyone looking for college. (vo) rush hour around here starts at 6:30 a.m. - on the nose. but for me, it starts with the opening bell. and the rush i get, lasts way more than an hour. (announcer) at scottrade, we share your passion for trading. that's why we've built powerful technology to alert you to your next opportunity. because at scottrade, our passion is to power yours.

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i did not see that coming. don't deal with disruptions. get better internet installed on your schedule. comcast business. built for business. tomorrow to cnbc. robert shil sr on sidewalk box 8:00 eastern time and he says the stock market is overvalued. he will make that case plus capital management's kyle bass joining sidewalk on the street for an exclusive interview. 10:30 a.m. smiler and bass both interesting, smart, successful guys tomorrow on cnbc. right now when you choose a college you have a couple things, where did your parents go, what schools to you like our use some of those allusive rankings. but the federal government has rolled out something over the weekend which i think -- and i hate to use this term -- really, really could be a game changer for how you select a college.

cnbc's sharon epperson joining us now. this is a college score card, i was scrolling through t it's awesome. >> it is awesome and i will agree with you it is a game changer. it is the administration's attempt to help students and their families make better, more informed decisions when it comes to college costs and affordability to avoid financial difficulty, the website is called college score card.ed.gov is designed to determine the cost of college, potential debt and what kids will have to pay for and pay out later. you can compare schools the average koths cost of attendance and salary after graduation. for example, if you want to search for a four year public or private college or university with an average under cost under $15,000, a graduation rate higher than 75% and average al sees after graduation more than $60,000 per year, four schools will pop up, princeton universi university, georgia institute of technology, university of king

abdullah berkley and harvard university. now, private universe on the list, princeton and harvard have the highest salaries after graduation, but princeton also has the lowest annual cost in the group. at least over $8,400 a year. attending princeton is cheaper than harvard and the two public institutions on this list. these are average costs, depending on the fetd ral, state or institutional aid that's available students may pay more or less but the tool is a great start to help families gather the data and numbers and experts i talked to applaud the college score card for providing dat that that was not previously available and it's expected to lead time improvement in information provided on many college search sites. >> i love you threw the harvard in there, you and melissa should hang out together. number two, people look at that and say $8,000 to go to princeton, are you nuts? it's because that's the aid, right? >> that's the aid. >> princeton gives people free tuition if they can't afford it.

>> the average get that people have for princeton is under $7,000. >> they give it to you for free because they are sitting on $16 million in an endowment. the other thing, too, i love this by the way, the other caveat is that the salary data is only of those students who took annual aid. >> exactly. >> if you borrowed zero you are not going to appear on that chart. >> the government is saying this is pretty representative of what's out there, what you're likely going to make, it is based on students that receive aid that does skew it a bit. one of the experts i talked to said is missing is the debt service to income ratio. >> sure. there's holes, yes. >> but you can kind of figure that out yourself because you can figure out what the total debt is based on the particular school, you can also look at your family's income range and how much you are actually going to pay as opposed to someone -- >> it will evolve, it's awesome. i love it. >> it's the go to guide. >> it really is. sharon epperson, thank you.

where did you go to school? melissa, where did you go to school? >> brian, i feel like you're insecure about where you went to school. >> i went to large land grant public university. hey, we had cows on campus at virginia tech. >> you are a lucky guy. i like cows. >> we have a great vet their school. >> final look at today's mystery chart. full steam ahead. wednesday up next. everyone loves the picture i posted of you. at&t reminds you it can wait.

let's reveal its mystery chart. up 22% over the past 23 months best in the s&p. a lot of you got t royal caribbean cruise lines, they are sitting at an all time high, no doubt a low fuel cost beneficiary, melissa. >> with us doug sandler and steve mosoko joins us now. steve, i'm going to start off with you. there's something interesting that popped out at me when i was reading the notes. you said the fed raises rates and say they're data dependent that would be a disaster. why would that be? >> well, i think that would create uncertainty. uncertainty as to what's happening next, when the next rate increase is coming, how big the next rate increase will be and market hates uncertainty. i think the market would clearly trade down on that. as i've said in the note, one of two things happens, either they don't raise rates or if they do raise rates they give more detailed answer as to what comes

next. doug, steve laid out something that could royal the markets a bit if they open the door and left the door open to uncertainty. in your view does it make a difference what the fed does and says in september when you say you like banks and home builders? >> well, first i'd say with the fed let's -- i think he makes a good point. what they do and what they say need to be consistent. our view is if they raise rates, whether it's september, october or the december meeting, it's probably a good thing. it's a lot like waiting for a spanking. the longer it takes before you get it the more you are worried, when it actually happens it isn't so bad. i think the market is going to feel like that. we actually end up look gts at stocks and as long as rates don't go up to a point where they start to be taking the bunch bowl away, in our view 3, 64, 5, 6%. the multiples will go up. maybe not the day the fed does it but in the next six to eight

months. i like a fed rate hike. i think it's what the market wants. from the home builders and banks i think ultimately fed raises rates because they think the economy is recovering. >> right. >> when that happens banks and home builders are late cycle companies and tend to do well when consumers feel good. just like they're taking cruises on royal caribbean, buying homes and borrowing money from the bank. >> steve, what sector or area do you like the markets regardless of what the fed does? does that exist for you? >> well, it does and i think there are a lot of stocks that have reeked extremely negatively for fears of a fed rate hike, i particularly like a lot of areas of reets, mortgage reets. >> guys, great discussion. thank you for your time, doug and steve. what's on "fast money" tonight? >> well, brian, i don't know if you have seen gopro's chart lately. in the past month it is down 44%.

so tonight why now could be the time to buy gopro and why a company out there might be looking to buy gopro as in acquisition. >> will you be wearing a gopro on your head? >> possibly. you will have to tune in at 5:00 to see. >> we want to see what you're seeing, that angle. we'll tune n melissa, thank you. "closing bell" starts right now. hell loerks welcome to the "closing bell," i'm kelly evans at the new york city stocking exchange and im bill griffeth. oil prices dpaulg on the back of weak chinese data over the weekend and opec now saying these low price right side hurting u.s. oil production. we will take you live to the nymex. the price of crude continues lower and with it goes gasoline too. >> and with it goes the stock market as art was pointing out today, the dow is down 72 points at the moment. apple doing all right. it's saying this